Ketiz Singh

Have you ever wondered how banks make money?

Hey there, my young friends! Today, let’s dive into the fascinating world of banking and uncover the secrets behind how banks earn their profits. It might seem like a magical place where your money is kept safe and sound, but in reality, banks are running a business using your hard-earned savings.

Imagine this – you deposit ₹100 in a bank, and they pay you interest at 4%. Sounds pretty good, right? But here’s the kicker – the bank takes your ₹100 and lends it to someone else at a higher interest rate, say 8%. When that person repays the loan, the bank keeps the difference as profit. It’s like a little money-making machine!

But what happens if you need to withdraw your money, but the bank has already lent it out?

• Don’t panic – banks keep a certain percentage of deposits as cash reserve to handle such situations.
• Plus, the RBI, India’s banking boss, sets rules to ensure banks can meet their obligations.

Remember: Your money is safe in the bank, even if it’s being used to help others achieve their dreams.

Now, let’s talk about how banks earn from loans in countries with very low-interest rates. In such cases, banks might reduce interest on savings accounts or charge fees for maintaining accounts. It’s a trade-off for banks to stay profitable.

Aside from interest income, banks also make money from fees, investments, and managing expenses like employee salaries. It’s a delicate balance of giving and taking to keep the money flowing.

Now, let’s take a peek at two big players in the Indian banking world – SBI and HDFC. While SBI has a higher market share due to its public sector status, HDFC’s valuation is higher because of its private bank flexibility.

Remember: Different banks have different strategies to thrive in the banking business.

So, if you dream of starting your own bank one day, you’ll need a cool ₹5 billion and RBI’s nod. It’s a big step, but hey, who knows what the future holds for you?

Keep exploring new business models and possibilities. Your journey to success is just beginning!

Keep dreaming big and reaching for the stars, young entrepreneurs!